SATHYABHAMA SCHOOL OF LAW

Information Technology Law

Module – 3 | E-Commerce

COMPILED BY
Ms. Kaviya R
Asst Professor, School of Law

ACADEMIC YEAR

2024 - 2025
 Table of Contents
E-COMMERCE ................................................................................................................... 4
EVOLUTION OF E-COMMERCE ....................................................................................... 4
DEFINITION AND MEANING OF E-COMMERCE ............................................................... 6
TYPES OF E-COMMERCE BUSINESS MODELS .................................................................. 7
BUSINESS TO BUSINESS (B2B) .................................................................................... 7
BUSINESS TO CONSUMER (B2C) ................................................................................. 8
CONSUMER TO CONSUMER (C2C) .............................................................................. 8
PEER-TO-PEER (P2P) .................................................................................................. 8
MOBILE COMMERCE (M-COMMERCE) ....................................................................... 8
UNCITRAL MODEL LAW ON E-COMMERCE......................................................................... 9
DIGITAL SIGNATURE AND E-COMMERCE .......................................................................... 11
LEGAL ISSUES ASSOCIATED WITH E-COMMERCE .......................................................... 12
CONTRACTS ................................................................................................................ 12
PRIVACY AND DATA PROTECTION ................................................................................ 12
INTELLECTUAL PROPERTY RIGHTS ............................................................................ 13
JURISDICTIONAL ISSUES .......................................................................................... 14
E-TAXATION .................................................................................................................... 14
TAX ISSUES EMERGING FROM ONLINE TRANSACTIONS ................................................ 15
E-TAXATION: PROBLEM AREAS .................................................................................... 15
OVERVIEW OF DEVELOPING E-TAXATION PRACTICES ................................................... 16
THE INTERNET TAX FREEDOM ACT (ITFA) ................................................................. 16
OECD MODEL TREATY .............................................................................................. 17
INDIA: E-TAXATION PRACTICE .................................................................................. 18
E-BANKING ..................................................................................................................... 18
FUNCTIONS OF E-BANKING ......................................................................................... 20
IMPORTANCE OF E-BANKING....................................................................................... 20
ADVANTAGES OF E-BANKING ...................................................................................... 22
ONLINE PAYMENT SYSTEM .......................................................................................... 24
WHAT IS A CREDIT CARD ............................................................................................. 24
CREDIT CARDS ............................................................................................................ 25

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 BENEFITS TO CUSTOMERS ........................................................................................... 25
GROWTH OF CREDIT CARD IN INDIA ............................................................................ 26
EMPLOYMENT CONTRACT .............................................................................................. 26
1.1. HOW ARE CONTRACTS OF EMPLOYMENT OFFERED? ............................................. 27
1.2. 10 TYPES OF EMPLOYMENT CONTRACTS ............................................................... 28
WHAT ARE DISTRIBUTION AGREEMENTS ......................................................................... 31
NEED FOR DISTRIBUTION AGREEMENTS ...................................................................... 32
NONDISCLOSURE AGREEMENT ....................................................................................... 33
WHAT HAPPENS IF AN NDA IS BREACHED? .................................................................. 33
TYPES OF NONDISCLOSURE AGREEMENTS: MNDA VS. NDA ......................................... 34
1. UNILATERAL (NDA) .............................................................................................. 34
2. MUTUAL (MNDA) ................................................................................................ 34
WHAT IS AN ESCROW AGREEMENT? ............................................................................... 34
HOW ESCROW AGREEMENTS WORK ........................................................................... 35
TYPES OF ESCROW AGREEMENTS ................................................................................ 35
WHAT ARE E-CONTRACTS? .............................................................................................. 36
ARE E-CONTRACTS BINDING AND VALID? .................................................................... 36
TYPES OF E-CONTRACTS .............................................................................................. 37
1. SHRINK WRAP CONTRACTS .................................................................................. 37
2. CLICK WRAP CONTRACTS ..................................................................................... 38
3. BROWSE WRAP CONTRACT .................................................................................. 38
CASES ......................................................................................................................... 38

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E-Commerce
The term e-commerce refers to the amalgamation of tools built on information and
communication technologies (by and large known as business software), in the organization,
to enhance their performance. This builds value for the company, its customers and its affiliates.
E-commerce spans much further than e-commerce or purchase and sale across the Web and
delves into the procedures and background of a business venture.

E-commerce is a powerful business setting that is formed when one connects critical business
systems directly with consumers, workforce, traders, and business associates using intranet,
extranet, e-commerce technologies, two-way applications and the Web. It is more than a smart
Web presence or a slick, flash-driven shopping cart. This is a critical surfacing of business
across the world, with a number of technologies getting into the enterprise computing
ecosystem.

E-commerce provides a powerful mechanism for companies to enhance productivity and bring
down costs. Nevertheless, in order to utilize these substantial benefits, organizations must make
sure that their e-commerce is implemented appropriately and matches with their market
segment. Ecommerce applications can be divided into three categories:

(i) Internal business systems

(ii) Enterprise communication and collaboration
(iii) Electronic commerce.

Today, e-commerce is a by word in the Indian society and it has become an essential part of
our daily life

EVOLUTION OF E-COMMERCE
As the society evolved the commercial practices also evolved. The barriers to trade were broken
chiefly by the language and later by transport. The barter trade gave way to acceptance of
bullion as the trading currency. With the passage of time nation states emerged as new political
units and with new technological developments, like telegraph and telephone further facilitated
the trade. For over a century these telecommunication devices became an integral part of the
commercial enterprises all over the world.

Later, in the early 1960s, computers were increasingly used to disseminate information across
geographical space. Though telegraph, telephones, telex and facsimile were still the relied upon
options, nevertheless the big corporations opted for Electronic Data Interchange (EDI). It refers

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to the process by which goods are ordered, shipped, and tracked computer-to computer using
standardised protocol. EDI permits the “electronic settlement and reconciliation of the flow of
goods and services between companies and consumers”. EDI saves money because the
computer, and not an office staff, submits and processes orders, claims, and other routine tasks.

EDI began in the 1960s as a computer-to-computer means of managing inventory, bill

presentment, shipment, orders, product specifications, and payment. EDI is made possible
because trading partners enter into master agreements to employ electronic messaging
permitting computer-to-computer transfers of information and validating computer-tocomputer
contracts.

The early adopters of EDI were companies running complex operations in the airlines,
shipping, railways and retail sectors. These companies developed their own proprietary format
for interchanging data messages. It led to development of proprietary systems. These
proprietary systems whether of a retail or automobile company were operation specific. It was
felt that a universal standard was impractical and unnecessary. Consequently, the lack of
universal standards made it difficult for companies to communicate with many of their trading
partners.

In late 1970s, the American National Standards Institute (ANSI) authorized a committee called
the Accredited Standards Committee (ASC) X-12 (consisting of government, transportation,
and computer manufacturers) to develop a standard between trading partners. The standard was
called ANSI X-12. Over a period of time sectors like paper, chemical, warehouse, retail,
telecommunications, electronics, auto, metals, textile, and aerospace developed and started
using sector specific EDI standards, which are subset of X12 standards.

Under the aegis of United Nations, organizations from different sectors collaborated and
developed an internationally approved standard structure for transmitting information between
different trading partners, called the United Nations Electronic Data Interchange for
Administration, Commerce and Transport (UN/EDIFACT) in 1986. It ensures transmission
compatibility of electronic business documents globally. In the US companies tend to use ANSI
X-12 protocol while their European counterparts prefer EDIFACT. Moreover, various industry
sectors use their industry specific protocols.

The EDI was like a business-to-business (B2B) model involving a company and its various
vendors performing commercial transactions using proprietary networks. By late 1980s
computers acquired the status of ‘personal computer’, i.e. became part of the private domain

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of an individual. It was EDI at the individual level supported by the public networks known as
Internet.

Hence, e-commerce evolved out of EDI and should be considered as a next logical step in the
development of commercial processes involving commercial transactions. Thus e-commerce
means doing business electronically across the extended enterprise. It covers any form of
business or administrative transaction or information exchange that is executed using any
information and communications technology.

Definition and Meaning of E-Commerce

A popular definition of business is as follows:

Business is the exchange or the buying and selling of entities (goods or commodities) on a very
large scale involving transportation from one place to another. In e-commerce, there is a need
for computers and Internet applications to manage and organize products and services. This
concept of using the Internet to connect with customers, business partners and distributors for
business purposes— as in the case of e-mail—is known as e-commerce or electronic business.

The terms ‘e-commerce’ and ‘e-business’ are often used interchangeably. E-commerce deals
with the buying and selling of information, products and services through the computer
network. E-commerce is defined as a business activity which uses an electronic medium. It
also refers to the buying or selling of goods and services without visiting a store. E-commerce
involves activities, such as the delivery of information, products, services and payment through
the electronic medium.

E-Commerce or Electronics Commerce is a methodology of modern business which addresses

the need of business organizations, vendors and customers to reduce cost and improve the
quality of goods and services while increasing the speed of delivery. E-commerce refers to
paperless exchange of business information using following ways.

• Electronic Data Exchange (EDI)

• Electronic Mail (e-mail)
• Electronic Bulletin Boards
• Electronic Fund Transfer (EFT)
• Other Network-based technologies

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The concept of e-commerce is all about using the internet to do business better and faster. E-
commerce is the process of buying and selling over the Internet, or conducting any transaction
involving the transfer of ownership or rights to use goods or services through a computer-
mediated network without using any paper document.

Electronic commerce or e-commerce refers to a wide range of online business activities for
products and services. It also pertains to “any form of business transaction in which the parties
interact electronically rather than by physical exchanges or direct physical contact.” Business
transacted through the use of computers, telephones, fax machines, barcode readers, credit
cards, automated teller machines (ATM) or other electronic appliances without the exchange
of paper-based documents. It includes procurement, order entry, transaction processing,
payment authentication, inventory control, and customer support.

E-commerce is subdivided into three categories:

• business to business or B2B (Cisco),

• business to consumer or B2C (Amazon), and
• consumer to consumer or C2C (eBay)

E-commerce the phrase is used to describe business that is conducted over the Internet using
any of the applications that rely on the Internet, such as e-mail, instant messaging, shopping
carts, Web services, UDDI, FTP, and EDI, among others. A type of business model, or segment
of a larger business model, that enables a firm or individual to conduct business over an
electronic network, typically the internet.

Types of E-Commerce Business models

There are mainly five models to conduct e-commerce, which are (i) Business to Business, (ii)
Business to Consumer, (iii) Consumer to Consumer, (iv) Peer-to-Peer and (v) Mobile
Commerce. These models are discussed in the following sections:

Business to Business (B2B)

In this form of business, buyers and sellers are both business entities. It is the most popular
form of e-commerce transacting crores of rupees. However, it does not involve individual
customers. It happens when a manufacturer supplies goods to a retailer or a wholesaler,
e.g., Dell sells computers and related accessories online, however, it does not produce all
the products.

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Business to Consumer (B2C)
This is the most common form of e-commerce that involves companies selling directly to
individual consumers. In the beginning, its performance was sluggish but after the late
1990s, its growth became high. The primary idea behind B2C is that marketers and retailers
can sell their merchandise to consumers online. This is done through data that is made
available via many online marketing tools, e.g., an online pharmacy giving free medical
consultation and selling medicines to patients. However, there are two basic problems faced
by B2C e-commerce, which is how to: (i) Increase volume and (ii) Sustain customer loyalty.
As the B2C model is of winner-take-all nature, many smaller firms find it difficult to enter
a market or remain competitive. At the same time, online consumers are very sensitive
about price and can be easily lured away by others. So attracting and keeping new
customers is difficult.

Consumer to Consumer (C2C)

This model of e-commerce helps to transact businesses between two people. This is
possible with the help of an intermediary, such as eBay, which provides a platform to help
consumers to transact the business. Without the help of an intermediary, it would be difficult
to conduct this type of business.

Peer-to-Peer (P2P)
This e-commerce model not only helps to do business; it is also a technology which helps
people to share their computer files and resources and that too without the help of a central
Web server. However, both sides need to install the required software to facilitate
communication on the common platform. However, P2P does not generate much revenue.

Mobile Commerce (M-Commerce)

M-commerce is the commerce transacted with the help of mobile phones. This is the latest
entrant in e-commerce. Mobile phones owners can contact each other and conduct business,
through direct contract, SMS and GPRS facilities. Companies doing business through the
GPRS try to optimize Websites to be viewed properly on mobile devices.

Apart from these models, there are other models of e-commerce, such as Government to
Business (G2B), Government to Citizen (G2C) and Business to Employee (B2E). These
models are a general categorization and they need not be followed thoroughly while doing
a business.

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UNCITRAL MODEL LAW ON E-COMMERCE
The Model Law has been divided into two parts. The Part I relates to the general provisions
relating to e-commerce, it legislates the three principles of non-discrimination, technological
neutrality, and functional equivalence. Besides establishing uniformity in the laws regarding
e-commerce and legal relevance for data communicated through electronic mode, MLEC also
establishes rules for formation and validity of e-contracts, for data message attribution, for
receipt acknowledgement and for determining receipt of data messages, etc.

The Part II of the Model Law deals with specific provisions for e-commerce in certain areas.

Key Provisions

General Provisions

Article 2 of the Law provides six definitions, the most important one is of “Data message”. It
is defined as information generated, sent, received, or stored by electronic, optical, or similar
means.This definition has been attributed after taking into consideration the future
technological developments as well, which is the reason for inclusion of the term similar
means. This wide definition includes the notion of a record and even revocation and
amendment. The sphere of application that Article 1 talks about, is for the information in the
form of data messages, in the context of commercial activities.

The Model Laws give the interpretational tools(Article 3) which call for a standard of
international origin and uniformity in application of general principles of law. There can be
variation in the communication of data messages by the agreement of the parties(Article 4).

Application of legal requirement to data messages

The principle of non-discrimination has been enforced by the means of Article 5 which
specifies that the information communicated via electronic mode, i.e., in the form of data
messages cannot be denied legal validity and effect. Information by the way of reference has
also been given legal validity(Article 5 bis) and thus, the application of this law has been
considerably widened. This is of utmost importance in the context of international law.

The nations required the documents to be in writing and validation was only given to the hand
written signature as a form of authentication. By the means of provisions in Articles 6 & 7, the
Model has done away with both of the above obstacles. Accessibility of data messages does
not require the document to be in writing, and recognition of digital signature marks the

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approval of the full structure of the contract. This provision is termed relevant for every
circumstance including a relevant agreement.

The notion of originality is defined in Article 8 which provides that data messages can fulfill
the legal requirement of presentation and retention of information in its original form subject
to the assurance of integrity and presentability of data messages. Presentability meaning the
ability to display the information where required. Article 9 specifies that the data messages
cannot be denied admissibility in the court of law solely on the basis that the information is in
the form of a data message. Thus, evidentiary value has been granted to data messages. The
requirement of retention of information is also met by retention of information in the form of
data messages subject to the accessibility, accuracy and originality of format and identity of
origin(Article 10).

Communication of data messages

Offer and acceptance of offer, when communicated in the form of data messages, cannot be
denied legal validity and enforceability solely on the grounds that they are in the form of data
messages. Thus, the formation of a valid contract was made possible through the means of data
messages.(Article 11)

Acknowledgement in the form of receipt of data messages has also been granted legal
validity.(Article 12)

The data message is attributed to the originator if it is sent by him or by a person authorised
by him(Article 13).

Article 14 provides that the receipt of the data message and its acknowledgement can also be
agreed upon by the parties beforehand.

The transaction ensues when the information goes out of control of the sender. The place of
dispatch is the place of business and the time is when the acceptance enters the system of the
addressee(Article 15).

Specific provisions

Articles 16 & 17 talk about carriage of goods and transport documents. They enforce the ability
to achieve carriage of goods by the means of data messages and fulfillment of the requirement
of transport documents through the same as well. It is imperative for the objective of
furtherance of international trade. This part has been complemented by other legislative texts

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such as the Rotterdam Rules and it may be the object of additional work of UNCITRAL in the
future.

DIGITAL SIGNATURE AND E-COMMERCE

Isn’t it easier to urge users for signatures on key documents like license agreements,
subscription deals and general contracts? As a result, digital signature plays a prominent role
in E-Commerce. If the close ties between Digital Signature and E-Commerce are clear, it is a
critical process to understand the collection of digital signatures for E-Commerce companies.
E-commerce companies are obliged to ensure the public as well as customers purchasing from
to use the payment methods they are presenting and that people buying goods are contractually
obligated to follow any licensing terms.

E-commerce, software distribution, financial transactions, and other situations that rely on
forgery or tampering detection techniques are some of the examples where digital signatures
can be misused. Hence, with their proper utilization, their misuse can be reduced to a great
extent. These signatures serve as a fingerprint for the buyer, regardless of the involvement of
business owners in business-to-consumer (B2C), business-to-business (B2B).

The legal complexity that comes into the picture could be a never-ending issue. Hence,
ecommerce retailers are probably dealing with them regardless of the degree to which they are
committed to e-signatures. If online retailers desire the consumers to purchase their products
or avail their service, they are highly dependent on their reputation. They must find ways to
ensure that the data is safe and stored in compliance with regulatory standards. This stems from
how e-commerce organizations use e-signatures and store the source data of the process
capture.

The key considerations that e-commerce companies or online retailers must adhere to while
implementing digital signatures are as follows:

1. Digital Signatures are essential: A collection of encrypted data that captures

the important data about the activity surrounding e-signature is known as a Digital
Signature. They are essential to protect the authenticity, integrity and privacy of online
transactions. By giving e-signatures a layer of legitimacy and protection against
tampering, digital signatures boost the implementation of e-signatures. However,
Ecommerce organizations must note that all of their operations are secure and legally

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 defensible. Digital signatures are essential as it plays a significant part in the process of
using e-signatures and help protect buyers and sellers alike.

2. Understanding the Terms: An e-signature is much more than just a tick box
where you select the “I agree” option. It must be ensured that users clearly assent to the
conditions of their website and in order to ensure the same, the terms used in the
agreement should be in clear, simple language that can be understood by a layman.

3. Country-specific laws: E-signature policy in a majority of nations or

jurisdictions makes the use of technology a favourable option. However, different
national and international bodies have different methods to incorporate laws for the
consumers and how their data needs to be stored. If there is any dispute regarding this,
you will be tried under the laws applicable to the specific jurisdiction.

LEGAL ISSUES ASSOCIATED WITH E-COMMERCE

Contracts
A contract is the most essential form of any business and is treated as a safeguard against any
complication that arises. If the clauses in a contract have any ambiguity, in such cases, it
becomes complex to handle disputes arising in business. A well-drafted contract without any
confusion protects the interests of the business in case of disputes.

However, a difficult question that law often arises: How do we know whether the offeree has
ACCEPTED the offer?

Additionally, this will require certain types of contracts and the impossibility of determining
the true consumer’s age, with the standard age to enter into contracts set at 18. As a result, it’s
critical that an online business portal considers this possibility and includes a form on its
website saying that the person with whom it’s dealing or entering into an e-contract has reached
the age of majority.

Privacy and Data Protection

The privacy of its users is a vital factor for every e-commerce company. Individuals and
organisations can easily get personal and sensitive information thanks to breakthrough
technology and a lack of safe processes. When it comes to internet enterprises, privacy is a big
concern that may lead to issues for both the company and its consumers. Consumers exchange
personal information with companies via the internet and expect the sellers to keep it private.
When an e-commerce firm caters to customers in other countries, those countries may have

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laws that render the e-commerce corporation accountable for infringing the privacy rights of
the foreign customer. For example, if Company A in India collects personal data from a
European Union customer and distributes it to firms in the United States, it may be accountable
for infringing on the customer’s privacy rights. When it comes to internet enterprises, privacy
is a big concern that may lead to issues for both the company and its consumers. Consumers
exchange personal information with companies via the internet and expect the sellers to keep
it private.

Intellectual Property Rights

All trademarks and copyrights for the items, words, and symbols to be utilised must be
protected. India, on the other hand, has a well-defined legal and regulatory framework for the
protection of intellectual property rights. Furthermore, the regulations have yet to be entirely
updated for total efficiency in the virtual world. For example, there is no law against the
misrepresentation and abuse of domain names.

Using content from another firm while creating material for your e-commerce website might
be a serious legal issue. This might mark an end to your e-business. There are several
royaltyfree websites that allow you to access their information and photos. You may utilise
those websites to generate online content for your company’s website.

E-commerce websites are often built and administered by third companies that are experts in
the sector. A third party is frequently in charge of the material. Thus, unless the parties
agreement expressly states that IP rights are protected, there is a risk of trademark, copyright,
or patent infringement on an online platform.

Trademark Security Problem

Not getting trademark protected is one of the main legal issues in the field of E-Commerce.

Since trademark is the company’s logo and symbol, the representation of business all over the
web, it must be protected. If it is not secure , it won’t take long before you realize your
trademark is being infringed upon. This is very common legal issue and can become a deadly
threat to e-business.

With the hackers on loose and cybercrime so common, trademark infringement of the business
or by your business can be a serious legal matter and may hinder the business’s progress.

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Copyright Protection Issue
While publishing content for E-Commerce website, using content of any other company can
be a severe legal problem. This might mark an end to your e-business. There are many sites
online which are royalty free and allow you to access their content and images. You may use
those sites for creating web content for your business site. Even if you unintentionally used
copyrighted content, the other party can easily sue your business.

Jurisdictional Issues
In India, there is a scarcity of jurisprudence on questions of jurisdiction in the e-commerce
sector. Due to the occurrence of several transactions, resolving disputes in the B2C sector is
particularly difficult. Aside from the design of the corporate structure, judgments must be made
on the jurisdiction in which the corporate structure should be located since this will decide the
scope of any responsibility that may emerge against the website. Apart from the form of the
corporate structure, decisions must be taken on the jurisdiction in which it should be based
since this will determine the scope of any liability that may arise against the website.

This means that you can be sued in a foreign court even if you are not physically present in that
nation, as long as your website has just a minimum connection to that nation. As a result, a
business should include an applicable choice of law and forum provisions in its online contract,
identifying the jurisdiction to which the contractual parties would be subject. In general, much
local legislation allows for a long-arm jurisdiction, which means that the execution of such
local laws has extraterritorial applicability if an act or omission has resulted in some illegal or
adverse consequence inside the country’s territory.

E-TAXATION
Tax revenues are a major source of income to the governments – whether Central or state.
There have been numerous statutory provisions giving powers to the governments to levy
both direct and indirect taxes. Over a period of time, numerous tax procedures and tax
authorities have been created to streamline the tax collections. The advent of e-commerce has
opened up a Pandora’s Box – how to tax online transactions? Is it possible to tax such
transactions in view of nature of Internet? Should e-commerce be taxed on lines of offline
commercial activities? There are more questions than answers.

The broad consensus that has emerged is: (i) Online transactions should not be immune
from taxation solely because the sale is conducted through a medium distinct from that

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of traditional offline businesses, and (ii) It is not prudent to tax these online transactions
purely on the basis of traditional taxation approach applicable to offline businesses.

TAX ISSUES EMERGING FROM ONLINE TRANSACTIONS

As e-commerce represent online transactions involving consumer(s) and business(es) – it is
occurring instantaneously, which makes it difficult to determine who the buyer and seller are
and where they are respectively located. Question is how to tax such online transactions? From
a point of electronic taxation following issues may emerge3: z Who is the customer? z Where
does the customer live?

 Did the transaction constitute sale of tangible property, the performance of

a service, or the transfer of intangible property?

 Which jurisdiction has the authority to tax the sale? What

online activities constitute sales for sales tax purposes?
 What constitutes a business connection/substantial nexus within a taxing
jurisdiction? Can Central and/or state Government(s) technologically capable to
monitor all online transactions?

 What kind of record retention requirements is necessary for tax purposes?

Answers to these questions would lay down the ground rules of electronic taxation vis-à-vis
ecommerce. Until then, traditional tax rules must be utilized to address these complex issues.

Moreover, it is a myth that electronic tax is an ‘additional’ tax burden – the fact is, it is a new
tax which is applicable in lieu of other indirect taxes.

E-TAXATION: PROBLEM AREAS

Apart from the above-mentioned tax issues there are certain problem areas as well. The
problems are because of the very nature of Internet technology, which is seamless and
unobtrusive. It may lead to:

• the lack of ‘physical’ connection between a consumer in one state and a seller in
another state;

• absence of permanent establishment (PE) – “place of business/Establishment”;

• ever changing location of web servers hosting the website, meant for online
transactions;

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 • relocation of businesses in tax havens, like Bahamas, Monaco, etc.

• general confusion regarding which country has the right to tax the transaction,
and at what rate;

• non-taxation of digital (intangible) goods, like software, music and data (or
information);

• export and import of digital (intangible) goods across international borders

without paying customs duty (or tariffs), thereby bypassing the existing export import
policies, regulations and tax system;

• a parallel channel of transactions, ignoring the traditional documents based on banking

practices;

• the general lowering down of ‘barriers to trade’ for the smaller and medium business
entities; and

• complete disregard to accounting and audit procedures

These problem areas constitute real threat to the establishment of an extensive platform dealing
with electronic taxation. It is thus imperative that in order to construct an effective etaxation
regime the problem areas should be addressed and proper guidelines must be framed to deal
with such issues. But care should be taken not to impose an overly strong regulation and tax
regime as this could lessen the financial attractiveness of conducting electronic commerce

OVERVIEW OF DEVELOPING E-TAXATION PRACTICES

The Internet Tax Freedom Act (ITFA)
The Internet Tax Freedom Act was introduced in March 1997 in the US Senate and was
enacted into law on October 21, 1998. Its objective was to ensure the continued growth of
the Internet as well as to prevent multiple or discriminatory taxes which could potentially stifle
the growth of e-commerce. It further articulated5:

 Jurisdictions are free to impose taxes on all “e-business sales provided that
the tax rate is the same as that which would have been imposed, had the
transactions been conducted in a traditional manner, such as by mail-order.

 States may impose taxes on sales of “tangible personal property over the
Internet, just as if those sales were conducted” in person.

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  A three year moratorium on multiple or discriminatory taxes on e-
commerce.

The ITFA moratorium expired on October 22, 2001, and was retroactively extended until
November 1, 2003.6 On December 3, 2004, Congress made the moratorium on taxes on Internet
access and multiple and discriminatory taxes on electronic commerce imposed by Internet Tax
Freedom Act permanent.7 Even though the IFTA imposes a moratorium on taxes, it still allows
the imposition of a single nondiscriminatory tax on goods and services sold on the Internet. In
order to collect a sales tax on Internet transactions, a State in the US must show that it has
sufficient jurisdiction over a company doing business over the Internet. Today many pure play
e-commerce companies (e-tailers), like Amazon.com and eToys, are paying sales taxes as if
their tax exposure is similar to catalogue businesses.

OECD Model Treaty

The Organization for Economic Co-operation and Development (OECD), a 30 member
organization has proposed that the basis of any online taxation system should be
equitable, simple, certain, effective, flexible and dynamic. The idea is to create a uniform
mode of taxation whether offline or existing offline taxation system. Broadly speaking,
electronic commerce should be taxed neither more nor less heavily than other commerce, and
online sales should, to the extent possible, be taxed at the state of destination of sales,
irrespective of the fact whether the vendor (seller) has a physical presence in the state or not.

The OECD Commentary, on the “OECD Model Treaty” issued on January 28, 2003, clarified
from an e-commerce perspective.

Whether a website constitutes a “place of business”?

The OECD Commentary mentions that a website, which is a combination of software and
electronic data, does not in itself constitute tangible property and hence cannot be referred
to as a “place of business”.

Whether location of a server constitutes a permanent establishment (PE)?

The OECD Commentary provides that if an enterprise owns (or leases) and operates the server
on which the website is stored and used, the place where that server is located could constitute
a permanent establishment of the enterprise.

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It is evident that the OECD countries place a lot of emphasis on permanent establishment from
e-taxation perspective.

India: E-taxation Practice

With the growth of e-commerce in India, it was felt that India should also adopt the concept of
PE in view of rapid globalisation of commerce. The Finance Act, 2002 has introduced the
definition of Permanent Establishment (PE) in the Income Tax Act, 1961. It shall mean to
include a fixed place of business through which the business of an enterprise is wholly or
partly carried on [S.92F (iii (a)]. It may include a wide variety of arrangements, like a place
of management, a branch, an office, a factory, a workshop or a warehouse etc. The definition
is similar to that of the OECD model. Apart from statutory provisions defining PE, e-taxation
in India is still a developing area. In fact, online taxation regime is presently confined to
development of IT infrastructure facilitating online filing of tax returns. Once it is achieved,
etaxation rollout would be the next logical step.

Further, it is obligatory to note that in Tata Consultancy Services v. State of Andhra

Pradesh[AIR 2005 SC.371], the issue before the Hon’ble Supreme Court was whether the
canned software which were available off the shelf in the form of software packages sold by
the appellants can be termed to be “goods” and as such assessable to sales tax. The
Constitutional Bench of five judges opined that for the purpose of sales tax, the term “goods”
cannot be given a narrow meaning. In India, the test to determine whether a property is “goods”,
for purposes of sales tax, is not whether the property is tangible or intangible or incorporeal.
The test is whether the concerned item is capable of abstraction, consumption and use
and whether it can be transmitted, transferred, delivered, stored, possessed etc.
Admittedly in the case of software, both canned and uncanned, all of these are possible.

It is important to note that under the Sale of Goods Act, 1930 “goods” means every kind of
movable property other than actionable claims and money; and includes stock and
shares, growing crops, grass, and things attached to or forming part of the land which are
agreed to be severed before sale or under the contract of sale [S. 2(7)].

E-banking
E-banking refers to electronic banking. It is like e-business in banking industry. E banking is
also called as "Virtual Banking" or "Online Banking". E-banking is a result of the growing
expectations of bank's customers. E-banking involves information technology-based banking.

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Under this I.T system, the banking services are delivered by way of a ComputerControlled
System. This bank's system does involve direct interface with the customers. The customers do
not have to visit the premises.

Banking is now no longer confined to the branches were one has to approach the branch in
person, to withdraw cash or deposit a cheque or request a statement of accounts. In India E-
banking is of fairly recent origin. The traditional model for banking has been through branch
banking. Only in the early 1990s there has been start of non-branch banking services. The good
old manual systems on which Indian banking depended upon for centuries seem to have no
place today. E-bank is the electronic bank that provides the financial service for the individual
client by means of Internet.

E-banking is defined to include the provision of retail and small value banking products and
services through electronic channels as well as large value electronic payments and other
wholesale banking services delivered electronically. Electronic banking is an umbrella term for
the process by which a customer may perform banking transactions electronically without
visiting a brick-and-mortar institution. Therefore transactions related to bank activities via
Electronic means and medium is called electronic Banking.

Electronic banking, also known as electronic funds transfer (EFT), is simply the use of
electronic means to transfer funds directly from one account to another, rather than by check
or cash. You can use electronic funds transfer to:

• Have your paycheque deposited directly into your bank or credit union checking
account.
• Withdraw money from your checking account from an ATM machine with a personal
identification number (PIN), at your convenience, day or night.
• Instruct your bank to automatically pay certain monthly bills from your account, such
as vehicle loan or mortgage payment.
• Have the bank transfer funds each month from your account to another account.
• Have your government social security benefits or tax refund deposited directly into your
account.
• Buy groceries and other purchases at the point-of-sale.
• Use a smart card with a prepaid amount of money embedded in it for use instead of
cash at a pay phone, road toll, or on college campuses at the bookstores.

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 Functions of E-banking
At present, the personal e-bank system provides the following services:

A. INQUIRY ABOUT THE INFORMATION OF ACCOUNT The client inquires about the
details of his own account information such as the card’s/account’s balance and the detailed
historical records of the account and downloads the report list.

B. CARD ACCOUNTS’ TRANSFER The client can achieve the fund to another person’s
Credit Card in the same city.

C. BANK-SECURITIES ACCOUNTS TRANSFER The client can achieve the fund transfer
between his own bank savings accounts of his own Credit Card account and his own capital
account in the securities company. Moreover, the client can inquire about the present balance
at real time.

D. THE TRANSACTION OF FOREIGN EXCHANGE The client can trade the foreign
exchange, cancel orders and inquire about the information of the transaction of foreign
exchange according to the exchange rate given by our bank on net.

E. THE B2C DISBURSEMENT ON NET The client can do the real-time transfer and get the
feedback information about payment from our bank when the client does shopping in the
appointed web-site.

F. CLIENT SERVICE The client can modify the login password, information of the Credit
Card and the client information in e-bank on net.

G. ACCOUNT MANAGEMENT The client can modify his own limits of right and state of
the registered account in the personal ebank, such as modifying his own login password,
freezing or deleting some cards and so on.

Importance of E-Banking
Businesses rely on efficient and rapid access to banking information for cash flow reviews,
auditing and daily financial transaction processing. E-banking offers ease of access, secure
transactions and 24-hour banking options. From small start-up companies to more established
entities, small businesses rely on e-banking to eliminate runs to the bank and to make financial
decisions with updated information.

The importance of E-Banking is as follows:

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Activity Review:

Business owners, accounting staff and other approved employees can access routine banking
activity such as deposits, cleared checks and wired funds quickly through an online banking
interface. This ease of review helps ensure the smooth processing of all banking transactions
on a daily basis, rather than waiting for monthly statements. Errors or delays can be noted and
resolved quicker, potentially before any business impact is felt.

Productivity:

E-banking leads to productivity gains. Automating routine bill payments, minimizing the need
to physically visit the bank and the ability to work as needed rather than on banking hours may
decrease the time involved in performing routine banking activities. Additionally, online search
tools, banking actions and other programs can allow staff members to research transactions and
resolve banking problems on their own, without interacting with bank employees. In some
cases, month-end reconciliations for credit card transactions and bank accounts can be
automated by using e-banking files.

Lower Banking Costs

Banking relationships and costs are often based on resource requirements. Businesses that place
more demands on banking employees and need more physical assistance with wire transfers,
deposits, research requests and other banking activities often incur higher banking fees. Opting
for e-banking minimizes business overhead and banking expenses.

Reduced Errors

Utilizing e-banking reduces banking errors. Automation of payments, wires or other consistent
financial activities ensures payments are made on time and may prevent errors caused by
keyboard slips or user error. Additionally, opting for electronic banking eliminates errors due
to poor handwriting or mistaken information. In many cases, electronic files and daily reviews
of banking data can be used to double or triple check vital accounting data, which increases the
accuracy of financial statements.

Reduced Fraud

Increased scrutiny of corporate finances through audits and anti-fraud measures requires a high
level of visibility for all financial transactions. Relying on e-banking provides an electronic
footprint for all accounting personnel, managers and business owners who modify banking

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activities. E-banking offers visibility into banking activities, which makes it harder for under-
the-table or fraudulent activities to occur.

Advantages of E-banking
The Advantages or benefits can be classified in three categories, these are:

1. National Point of View

2. Banks’ Point of View
3. Customers’ Point of View

National Point of View

Though in these days banks transaction and activities has brought negative impact on the
economy of our country, the investment in e-banking by banks can make some long-term
benefits for our country. The advantages that our country is getting from e-banking action are:
Job creation The issue of computers eliminating jobs of people was quite emotional and
painfully real. But it has two sides that automation will eliminate certain types of job like record
keeper and also created jobs like administrator, system analyst, programmer, operator etc. and
helped to reduce unemployment problem.

Contribution to GDP Banks with a national economy, work towards building national capital,
increasing national savings and mobilizing investments in trade and industry. Economic
benefits: E-banking served so many benefits not only to the bank itself, but also to the society
as a whole.

• E-banking made finance economically possible: (i) Lower operational costs of banks (ii)
Automated process (iii) Accelerated credit decisions (iv) Lowered minimum loan size to be
profitable.

• Potentially lower margins: (i) Lower cost of entry (ii) Expanded financing reach (iii)
Increased transparency.

• Expand reached through self-service: (i) Lower transaction cost (ii) Make some corporate
services economically feasible for society (iii) Make anytime access to accounts and loan
information possible.

Banks’ point of view

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From the banks’ view point, banks are getting some specific benefits or advantages after
starting the e-banking services. These advantages are:

Branding Banks offering e-banking services was better branding and better responsiveness to
the market.

Profit Maximization The main goal of every company was to maximize profits for its owners
and banks were not any exception. Banks are increasing its profit by reducing the cost of paper,
time etc. by using e-banking.

Thus, automated e-banking services offered a perfect opportunity for maximizing profits.
Increased Services Quality Features of E-banking services include less time, complete
transaction, no human conflict and presence etc. thus the quality of services of bank is
increasing day by day. Increased Customer Rate It is the most noticeable change in bank after
starting e-banking services. Customers are accepting this medium beside a traditional account.
Ultimately, the profit of bank is increasing.

Customers’ point of view

The main benefit from the bank customers’ point of view was significant saving of time by the
automation of banking services processing and introduction of an easy maintenance tools for
managing customer’s money.

The main benefits of e-banking were as follows:

➢ Increased comfort and timesaving-transactions made without requiring the physical

interaction with the bank. 135
➢ Quick and continuous access to information.
➢ Corporations had easier access to information as they can access multiple accounts at
the click of a button.
➢ Better cash management. E-banking facilities speed up cash cycle and increases
efficiency of business processes as large variety of cash management instruments is
available on Internet sites of banks.
➢ Private customers looked for slightly different kind of benefits from e-banking.
➢ Reduced costs: This was in terms of the cost of availing and using the various banking
products and services.
➢ Convenience: All the banking transactions performed from the comfort of the home or
office or from the place a customer wants to.

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 ➢ Speed: The response of the medium was very fast; therefore customers actually waited
till the last minute before concluding a fund transfer.
➢ Funds management: Customers downloaded their history of different accounts and do
a “what-if” analysis on their own PC before affecting any transaction on the web

Online Payment System

There are many modes under the online payments system. In this method, a third party must
be involved. Credit card, debit card, money transfers, and recurring cash or ACH disbursements
are all electronic payment methods. Electronic payment technologies are magnetic stripe card,
Secured Payment Gateway (SPG), E-Wallet, Mobile Payment, Smart Cards, E-Billings, Net
Banking etc.

WHAT IS A CREDIT CARD

In its non-physical form, a credit card represents a payment mechanism which facilitates both
consumer and commercial business transactions, including purchases and cash advances. A
credit card generally operates as a substitute for cash or a check and most often provides an
unsecured revolving line of credit. The borrower is required to pay at least part of the card’s
outstanding balance each billing cycle, depending on the terms as set forth in the cardholder
agreement. As the debt reduces, the available credit increases for accounts in good standing.
These complex financial arrangements have ever-shifting terms and prices. A charge card
differs from a credit card in that the charge card must be paid in full each month. In physical
form, a credit card traditionally is a thin, rectangular plastic card. The front of the card contains
a series of numbers that are representative of various items such as the applicable network,
bank, and account. These numbers are generally referred to in aggregate as the account number
or card number. A magnetic stripe, often called a magstripe, runs across the back of the card
and contains some of the account’s information electronically. The back of the card also
contains a cardholder signature box. There are many other physical attributes to a credit card;
however, as technologies progress, their physical form is morphing. For example, multi-
application cards (sometimes referred to as smart cards) involve aspects of cryptography (secret
codes) and, in place of the magstripe, have a microprocessor, or chip, built into the card. The
enhanced memory and processing capacity greatly exceeds that of the traditional magstripe
card, and the multi-application cards can enable consumers to access several financial accounts
and other services or data (like merchant loyalty programs) with a single card. Emerging
formats also include contactless and biometric payment options. With the contactless payment

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format, cards are tapped on readers (instead of swiped) at the point-of-sale. This format is also
known as proximity, “tap n go,” or blink technology. The biometric format relies on a
cardholder’s physical or biological features by using identification techniques like fingerprint
verification, iris scans, or voice scans. Electronic payment innovations may well be only in
their infancy.

Credit Cards
A credit card is a system of payment named after the small plastic card issued to users of the
system. In the case of credit cards, the issuer lends money to the consumer (or the user) to be
paid later to the merchant. Credit cards allow the consumers to 'revolve' their balance, at the
cost of having interest charged. Most credit cards are issued by local banks or credit unions.

The credit card was the successor of a variety of merchant credit schemes. It was first used in
the 1920's, in the United States, specifically to sell fuel to a growing number of automobile
owners. In 1938, several companies started to accept each other's cards.

The card is issued by bank with different credit unions along with their logos
(VISA/MASTERCARDS/DISCOVER/AMERICAN EXPRESS) are called acquirers who
sign up with the merchants, while the banks are called issuers.

Credit card issuers usually waive interest charges if the balance is paid in full each month, but
typically will charge full interest on the entire outstanding balance from the date of each
purchase if the total balance is not paid.

Benefits to Customers
Because of intense competition in the credit card industry, credit card providers often offer
incentives such as frequent flyer points, gift certificates, or cash back (typically up to 1 per
cent. based on total purchases) to try to attract customers to their programs.

Low interest credit cards or even 0% interest credit cards are available. The only downside to
consumers is that the period of low interest credit cards is limited to a fixed term, usually
between 6 and 12 months after which a higher rate is charged. However, services are available
which alert credit card holders when their low interest period is due to expire. Most such
services charge a monthly or annual fee.

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Growth of Credit Card in India
India is the second fastest growing market for financial cards in the Asia-Pacific region. The
country's credit card base, pegged at 27 million in 2007, is growing at an annual rate of 30-
35%. The cardholders are increasingly using credit/debit cards for dining, purchasing clothing,
petrol, durable goods and jewellery. Most Indians now have multiple cards, through which they
utilize balance transfers to reduce their interest burden over the short term. A thriving economy,
substantial increase in disposable incomes and consequent rise in consumer expenditure,
growing affluence levels and consumer sophistication have all led to robust growth in credit
cards, and each issuer has posted an enviable annual growth rate for several years. New
products, foreign participation and a booming tourism industry are combining to create high
levels of growth in India's nascent financial cards market, helped by product innovation and a
supportive regulatory environment.

The number of credit and debit card users in India is climbing fast, and rising affluence is likely
to erode Indians' lingering reluctance to spend on credit.

Indians have traditionally valued thrift and frugality. But the spread of affluence in the wake of
rapid economic growth is challenging these values, at least for many middle-class and high-
income families. One sign of this is the phenomenal growth in the number of credit and debit
cards in India-in the past three years, the number of credit cards has more than doubled and the
number of debit cards has almost quadrupled. However, despite these impressive rates of
growth, the Indian market for financial cards is only beginning to show its enormous potential.
Future growth will be driven by rising consumerism, intensifying competition among card
issuers and an expanding financial architecture-although a culture of credit-based purchasing
may take some time to develop.

employment contract
An employment contract is an agreement issued during the hiring or renewal process that
establishes the terms of your work relationship as an employee at a new organization. Typically,
if the contract is a written document, both you and your employer sign it to signify your
agreement. Contracts usually detail the rights and responsibilities of both parties, and
organizations commonly use them to help all parties involved understand their obligations

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throughout the term of a new hire's employment. Here are a few things that may be explained
in a contract:

• Salary information
• Duration of employment
• Schedule
• Medical insurance
• Dental insurance
• Paid time off (PTO) policy
• Sick leave policy
• Retirement plans
• Protections
• Limitations
• Non-compete clauses
• Conflict resolution protocol
• Employment conclusion details

1.1. How are contracts of employment offered?

Contracts can be offered in multiple forms, depending on how you and your employer reach
an agreement. While many think of contracts as documents to be signed and processed, that
isn't always the case—contracts can be offered through conversation or implicit messaging as
well. Here are the three most common forms that are used to offer contracts:

Written contract

A written contract is one of the most common forms of employment contracts. Written contracts
explain your employment relationship's specific details, including your salary, schedule,
employment duration, PTO policies, benefits eligibility and more. Written contracts are popular
because they can fully and legally document an employment agreement that both employers
and employees explicitly sign. This means that if any discrepancies occur during your

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employment period, you can return to your contract to reread it and clarify any questions or
concerns that arise.

Verbal contract

A verbal contract is a non-written employment agreement. Often, a verbal contract is extended

during a discussion about the particularities of your employment relationship. A hiring manager
may verbally offer you a position with a set salary, benefits and other terms. If you agree to
these terms verbally, this discussion can serve as a legal employment contract, especially if
another witness is present to testify to the agreement being made. However, verbal contracts
can be challenging to uphold, considering there is typically no accompanying written document
that establishes specific terms.

Implied contract

Implied contracts are both non-written and non-verbal employment agreements. Usually, the
use of implied contracts occurs in the absence of a verbal or written contract. If you and your
employer do not agree to specific terms through a discussion or by signing a document, but
you still begin to work for them in some capacity, you may have an implied contract. Implied
contracts allow employees to assume that an employer may afford them the same rights,
protections and benefits as previously established by an employer's actions or guidelines.For
instance, if your employer does not explicitly state how long your employment will last but has
previously said in a general context that most employees serve in their roles for one year at a
time, it is implied that you may work in your position for one year as well. Like verbal
contracts, implied contracts can be challenging to uphold, but they can serve as legal
agreements in some contexts.

1.2. 10 types of employment contracts

The type of contract you're offered in a new role is usually determined by factors like your
status as an employee, an organization's needs and the type of work you perform in your role.
Here are 10 types of contracts to look out for during the hiring process:

Full-time contract

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Full-time contracts are offered to permanent employees who work a full workweek, usually 35
hours or more. These contracts usually include information about benefits, paid holidays,
vacation time, sick time and retirement plans. Even further, some full-time contracts present
new employees with opportunities for other benefits, like professional development
opportunities or workplace perks. Full-time contracts are almost always written contracts since
they include many components, and employers normally want to be thorough and clear when
offering such an extensive agreement.

Part-time contract

Part-time contracts are extended to employees who work a reduced number of hours compared
to full-time employees. Typically, part-time contracts are offered to those who serve less than
35 hours per week and often include some of the same stipulations and protections as full-time
contracts. Many part-time schedules detail the employee's flexibilities, weekly schedule and
rate of pay. However, it is important to note that part-time contracts usually do not include
information regarding insurance, salary or PTO—all benefits typically reserved for full-time
employees.

Zero-hour contract

Zero-hour contracts are offered to employees who work irregularly or only when work is
available. In zero-hour agreements, an employer agrees, in writing or verbally, that they will
offer work when it is available, and an employee agrees to work such shifts or remain on call
for availability purposes. Zero-hour contracts commonly specify that an employee will work a
minimum amount of hours or shifts per month—a number set by the employer in most cases—
and that the employee holds the right to refuse any work assignments that may be inopportune.
Zero-hour contracts are often used to hire temporary employees, such as day laborers or
babysitters. Unlike full-time and part-time contracts, though, zero-hour contracts do not include
information about the standard rate of pay, regular scheduling or benefits, as zero-hour
employees are not typically offered such protections.

Casual contract

Casual contracts are usually extended to employees who work on a seasonal or temporary basis.
Through casual contracts, employers typically outline that they will only pay employees for
completed work and that the company isn't required to offer a minimum amount of shifts or
work hours. In addition, such contracts sometimes state that employees are not mandated to

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take any shifts or work hours offered.Casual contracts offer both employees and employers
flexibility in their agreement. However, they are typically only used to specify short-term
employment relationships that may or may not be renewed after the duration of employment
expires.

Freelance contract

A freelance contract is typically offered to an employee hired to complete a specific project,

such as designing a website, writing an article, taking photos or doing home renovations.
Freelance contracts outline the limitations of hours, project details, salary and payment terms.
These contracts protect freelancers from receiving late payments or from any project-related
challenges that may occur. Freelance contracts do not often include information about benefits
like insurance or PTO, as freelancers are usually considered self-employed and sometimes even
work other full-time jobs.

Union contract

Union contracts are standardized legal agreements typically offered to those who join a local
or nationwide union of workers. These contracts are often provided to employees of specific
trades who may work directly for the union itself or be contracted to work for a private
company. While a private company may be hiring you and paying your salary, a union can
provide employees with other contract items. Union contracts outline job descriptions, duties,
vacation time, PTO, benefits and pension details. These contracts are highly beneficial to
employees because they are specifically designed to advocate and protect employee rights.

Executive contract

When companies hire high-profile executives for upper management roles, they often extend
executive contracts. These contracts, similar to full-time contracts, detail all of the traditional
benefits, protections and perks afforded to an executive employee, but they may also include
special incentive offers that can attract high-quality candidates. These incentives may include
contract items like high salaries, severance packages and perks like a company car. It is also
quite common for executive contracts to have very specific clauses about confidentiality and
working in similar roles for competitors.

Fixed-term contract

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A fixed-term contract is a highly specific and written contract extended to employees who only
work for a set amount of time or until they complete a specific task. Fixed-term contracts are
commonplace for temporary or contract workers who may take over a job for a specified
amount of time or help an organization fill a gap during a time of need.Fixed-term employees
often receive the same benefits and protections as other full-time or part-time employees during
their employment tenure, which can be detailed in the contract. Additionally, many fixed-term
contracts can lead to permanent contracts once they are up for renewal.

At-will agreement

An at-will agreement is a type of employment agreement that may look like a contract but does
not actually afford employees many protections. At-will agreements usually outline all of the
same things that a contract does—employee benefits, salary, time off and more—but such
agreements rarely specify the duration of employment or guaranteed rights. Because of this,
at-will agreements allow employees to leave jobs whenever they'd like and give employers the
ability to conclude their employment without reason, making such agreements a challenge to
uphold in cases of potential discrepancy.

Non-compete and confidentiality contracts

Employers establish non-compete contracts to prevent employees from working for

competitors and protect a company's assets or confidential information from being shared with
external parties. Non-compete contracts are often included as a part of a larger employment
contract, but they may also be extended as standalone documents or verbal agreements. A
common type of non-compete agreement is the non-disclosure agreement (NDA), which
prevents employees from revealing confidential information that may be vital to a company's
continued operations.

What are distribution agreements

The distribution agreement (also known as a “wholesale distribution agreement”) governs the
distribution of items made by a producer (also known as a “supplier”) and sold by a distributor.
There are two primary parts to the distribution agreement.

On one hand, like in a normal sales agreement, the supplier agrees to provide and sell its items
to the distributor under specific conditions. The distributor agrees to acquire and accept
delivery of the supplier’s products at regular intervals over the life of the agreement (sales

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agreement with successive deliveries), and the supplier agrees to deliver them at frequent
intervals.

The parties’ economic goal, on the other hand, is to promote the supplier’s products in a certain
region. This implies that the distributor is responsible for promoting and marketing the
supplier’s goods. In this case, the supplier frequently offers the distributor exclusive rights to
its items in the agreed-upon zone. It is natural for a distribution deal to be signed for a long
period of time. As a result, the agreement’s wording is critical, because disagreements might
occur long after the agreement has been signed.

The details of the agreement are defined in the distribution contract, which includes the cost of
the items or the commission rate, the length of the contract, the distributor’s operating area,
and other data.

Need for distribution agreements

Despite the fact that reselling is frequently done on the basis of an informal agreement, there
are a few reasons why one should get into a formal distribution agreement:

• A misunderstanding may result from a verbal or informal agreement, and the parties
may believe that it is not necessary to observe all of the provisions of an informal
agreement.
• The possibilities of misunderstanding and misinterpretation are reduced when an
agreement contains explicit terms and conditions expressed in straightforward
words.
• In the event that one party willfully violates the terms and conditions agreed upon,
the victim party will have a lot easier time obtaining legal protection.

A nondisclosure agreement, or NDA, creates a confidential relationship between a person or

business that has confidential or trade secret information and another person who has access to
that information. The NDA protects these business secrets by limiting the way they can be used
or disclosed.

A trade secret is any type of information that a business wants to keep private so it can enjoy
an economic advantage over its competitors. The term “trade secret" may sound high-tech—
and in fact, technology companies often do have trade secrets—but trade secrets aren't
relegated to any one industry. Examples include:

• Customer lists
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 • Expansion plans

• Information about new products or developments

• Details about pending litigation

• Data about a company's clients

nondisclosure agreement
A nondisclosure agreement may be a stand-alone document or in confidentiality clauses in
another document such as an employment agreement, an independent contractor agreement, or
a contract that establishes a business relationship. A standard nondisclosure agreement or
confidentiality agreement includes the following:

• Explanation: This is a definition of the information that is considered confidential.

• Exclusion: This is a description of any information that is excluded from

confidentiality. For example, confidential information may be disclosed if required for
legal or accounting purposes. Information is usually not considered confidential if it
has already been publicly released.

• Obligations: This is a description of the receiving party's obligations. In addition to

keeping the information confidential, the receiving party may be required to destroy or
return confidential information when they're finished with it.

• Time periods: A nondisclosure agreement may limit the amount of time the
information is considered confidential.

• Miscellaneous terms: Like most contracts, an NDA may contain standard contract
terms at the end, including terms related to modifications, choice of law, choice of
venue, arbitration, and attorney fees.

What happens if an NDA is breached?

It depends on the terms of the NDA. Breaching or violating an NDA is a serious offense and
can result in one of several courses of action. Here are some actions that can come from NDA
violations:

• Termination: The person can be terminated from their position.

• Fines: They can be mandated to pay back what was lost due to their actions.

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 • Court action: They may be the subject of a lawsuit.

Types of nondisclosure agreements: MNDA vs. NDA

Depending on the situation, there can be different types of nondisclosure agreements to
consider. Some are one-sided, while others contain restrictions on both sides. Here are the two
types of NDAs to choose from:

1. Unilateral (NDA)
Unilateral nondisclosure agreements are the most common NDAs available. They act as a
one-way contract, as only one party discloses information to another party. Some common
examples of unilateral NDAs include:

• Employer-employee NDA: Restricts employees from revealing trade secrets and

business information

• Company-contractor NDA: Restricts hired contractors from taking business

information and sharing it with competitors or using it for themselves

• Inventor-evaluator NDA: Restricts evaluators from stealing someone's invention and

patenting it as their own

2. Mutual (MNDA)
Mutual nondisclosure agreements (MNDA), also known as bilateral agreements, are used
when two parties disclose confidential information to each other. Each party can then decide
how their information is restricted and used.

For example, a company contemplating a merger or joint venture with another company may
enter into a mutual nondisclosure agreement. This way, they're both able to share private
company information without fear of it being used against them.

What Is an Escrow Agreement?

An escrow agreement is a contract that outlines the terms and conditions between parties
involved, and the responsibility of each. Escrow agreements generally involve an independent
third party, called an escrow agent, who holds an asset of value until the specified conditions
of the contract are met. However, they should fully outline the conditions for all parties
involved.

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How Escrow Agreements Work
In an escrow agreement, one party—usually a depositor—deposits funds or an asset with the
escrow agent until the time that the contract is fulfilled. Once the contractual conditions are
met, the escrow agent will deliver the funds or other assets to the beneficiary. Escrow
agreements are commonly used in different financial transactions—especially those that
involve significant dollar amounts such as real estate or online sales.

Escrow agreements must fully outline the conditions between all parties involved. Having one
in place ensures all the obligations of the parties involved are met, and that the transaction is
conducted in a safe and reliable manner.

An escrow agreement normally includes information such as:

• The identity of the appointed escrow agent

• Definitions for any expressions pertinent to the agreement
• The escrow funds and detailed conditions for the release of these funds
• The acceptable use of funds by the escrow agent
• The duties and liabilities of the escrow agent
• The escrow agent's fees and expenses
• The jurisdiction and venue in the event of a legal action

Most escrow agreements are put into place when one party wants to make sure the other party
meets certain conditions or obligations before it moves forward with a deal. For instance, a
seller may set up an escrow agreement to ensure a potential homebuyer can secure financing
before the sale goes through. If the buyer cannot secure financing, the deal can be called off
and the escrow agreement cancelled.

For certain transactions such as real estate, the escrow agent may open up an escrow account
into which funds are deposited. Cash has traditionally been the go-to asset that people entrust
to an escrow agent. But nowadays, any asset that holds a value can be put into escrow including
stocks, bonds, deeds, mortgages, patents, or a check.

Types of Escrow Agreements

Escrow agreements are frequently used in real estate transactions. Title agents in the United
States, notaries in civil law countries, and attorneys in other parts of the world routinely act as
escrow agents by holding the seller's deed to a property.

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Payment is typically made to the escrow agent. The buyer can perform due diligence on his
potential acquisition—like doing a home inspection or securing financing—while assuring the
seller of his capacity to close on the purchase. If the purchase goes through, the escrow agent
will apply the money to the purchase price. If the conditions set forth by the agreement are not
met or the deal falls through, the escrow agent can refund the money to the buyer.

Stocks are often the subject of an escrow agreement in the context of an initial public offering
(IPO) or when they are granted to employees under stock option plans. These stocks are usually
in escrow because there is a minimum time limit that needs to pass before they can be freely
traded by their owners.

What are e-contracts?

E-contracts are the cousins of contracts who went abroad and came back with the new
electronics and a fancy name. Electronic contracts are contracts in the digital version and are
in demand these days. E-contracts are very similar to regular contracts, the only difference is
that they take place through a digital mode of communication that is online. E-contracts have
eaten the job of the middlemen, now sellers reach out to the customers directly. The middlemen
now are the computer programs that connect the seller with an electronic agent i.e. the app and
the buyer also with an electronic agent. Basically, it creates a platform for the buyer and seller
to meet.

Are e-contracts binding and valid?

In India, the Indian Contract Act, 1872, Section 10 states that “All agreements are contracts if
they are made by the free consent of parties competent to contract, for a lawful consideration
and with a lawful object, and are not hereby expressly declared to be void.”

Also, Section 10(A) of The Information Technology Act 2000 states that “Where in a contract
formation, the communication of proposals, the acceptance of proposals, the revocation of
proposals and acceptances, as the case may be, are expressed in electronic form or by means
of an electronic record, that such contract shall not be deemed to be unenforceable solely on
the ground that such electronic form or means was used for that purpose.”

According to the Indian Evidence Act, 1882, Electronic signatures are also treated as proof of
signature and Digital Signature Certificates are generated when a document is electronically
signed and this certificate is also legally valid and binding according to the IT Act, 2000.

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In India, contracts are governed by The Indian Contract Act, 1872, and electronic contracts
must be valid within the interpretation of the law. The essentials of electronic contracts are;

1. Offer,

2. Acceptance,

3. Lawful consideration,

4. Lawful object,

5. Competent parties to contract,

6. Free consent,

7. Certainty of terms.

E-contracts are a substitute for expensive and inefficient on paper documentation and are
preferred to avoid a lengthy process. On the other hand, electronic contracts are efficient to use
and the turnaround time is much higher than lengthy paper works. In fact, e-signatures also
save a lot of time and effort. So, e-contracts are enforceable by law and legally valid even if
they are digitally signed and executed. However, it is different in the case of click-wrap
contracts.

Types of e-contracts
There are different types of electronic contracts to name a few shrink-wrap contracts, click-
wrap contracts, browse-wrap contracts, source-code escrow contracts, software development
and licensing agreements, and many more. Here are three different types of contracts;

1. Shrink wrap contracts

The name of this contract came from the shrink wrap packaging of the CD-ROMs in which
software used to be distributed. Shrink-wrap contracts are the licensing agreements for different
software. These contacts are the license agreements or boilerplate or terms and conditions
which are wrapped with the product itself. When a customer uses the product, it means that he
has accepted the contract. Shrink wrap is basically the plastic wrapping done on the cover of
the product.

Shrink wrap is mostly used by IT companies. The most interesting feature of this contract is
that acceptance of this contract can be reversed by returning the product.

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Also, these days licensing agreements are not delivered with the product instead it shows up
before installing the software.

2. Click wrap contracts

Have you seen the long texts, detailed terms and conditions for using an app or software that
nobody reads? Yes, those are the Click wrap contracts. As the name suggests, the party is just
a click away from signing this contract. They just need to click a button or check a box to
accept the contract. Basically, the user is forced to sign up the contract otherwise he would not
be able to proceed and therefore they are not negotiable at all. There are some legal issues
related that will be covered later.

3. Browse wrap contract

Have you seen these lines which go like “By continuing your use of these services, you agree
to the terms and conditions” or “By signing up I agree to the terms of use”?

Browse wrap contracts are seen at the bottom of the webpage and the acceptance is assumed if
the customer is using the application. These contracts are commonly seen in websites and even
in some mobile apps or software applications. They can also be seen through a hyperlink.

Cases
Now let’s talk about the enforceability of these contracts. In general, the validity of Click Wrap
contracts is more than the validity of the Browse Wrap Agreements in the courts.

In the case of Long V. Provide Commerce Inc., the court held that the Browse Wrap contract
will only be enforceable if the consumer has read and is aware of all the terms mentioned in
the contracts. The conclusion of this case was that these contracts are only enforceable if a
reasonably prudent man would know the terms of the contract which will depend on the
placement and the design of the links.

In another case of Nguyen V. Barnes and Noble Inc., the court ruled that the contract would be
enforceable on the basis of proximity and conspicuousness of the link. In the case of Re
Zappos.com Inc., the court held that these contracts cannot be enforced because the font, colour
and design of the links of these contracts are similar to the other links. Therefore, consumers
were not able to distinguish.

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